In This Issue:
Unexpected Change of Direction Can Succeed, but Patterns Matter
The life of Lowry Mays, who is the subject of the September 17-18, 2022 Wall Street Journal obituary article “Entrepreneur Stumbled into Radio Business” conveys important lessons about business success.
As the article’s title indicates, Mays stumbled into success in the radio business. This illustrates how success can and does occur when unexpected turns take place. Facing unexpected circumstances, Mays had to take control of the business where he had originally planned to just be an investor. But, once he took the unexpected role of running the business, rather than only investing in it, he opted for taking the company in a direction that followed the patterns of success. And, sticking with those patterns brought tremendous business success.
Said another way, the initial plan for the business may not matter as much as does recognizing when the business needs to change, perhaps unexpectedly, and making changes that fit with success patterns. This doesn't mean a strong initial plan lacks value. But, it does mean that if circumstances change unexpectedly, the business may be able to shift into a successful new direction, as long as the shift is consistent with business success patterns.
This is important to remember these days, when so much has been changing, and entire industries have been shut down or severely hampered in ways no one would ever have expected before the pandemic. When things take an unexpected turn, it’s important to look for ways to make changes that are consistent with the patterns of business success.
Lowry Mays did this when he unexpectedly took over operational control of a single radio station he had invested in. He had originally intended to be an investor with no operating responsibilities. Soon, he and a partner he brought in “were buying more stations,” according to the Wall Street Journal article, which says that Mays and his partner “were using rapid fire acquisitions to turn it into the largest US radio broadcaster.” The company was Clear Channel Communications, and is now known as iHeart Media.
Based on my research, starting with one unit of a business, like Mays did with the radio station, and expanding by adding many more via a series of acquisitions, has historically been a success pattern for business growth. Since building on one’s background generally improves the odds of success, Mays’ efforts to expand via acquisitions most likely benefited from his prior experience as an investment banker.
Years later, however, things were less rosy. According to the Wall Street Journal article, “Clear Channel bought SFX Entertainment, Inc., a giant concert promoter, for nearly $3 billion. The concert business was supposed to thrive on support from the radio stations and the billboards, but those synergies didn’t match expectations.” Based on my research, unrealistic expectations for synergies is a very common failure pattern in business. The Wall Street Journal article said, “Clear Channel’s results deteriorated in the early 2000s as attractive acquisitions became harder to find.”
In summary, Mays’ experience in the radio business illustrates important principles of business success. It shows how unexpected setbacks can be overcome by making the right kind of changes. It illustrates how fit with one’s background, like business acquisitions may have fit with Mays’ investment banking experience, can be good for business success. And, it reinforces the importance of being especially careful when looking for synergies from combining businesses, as this is a common area where expectations are not met and failure occurs.
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